State Report: Law Against "No Fault" Fraud Reducing Rates

TALLAHASSEE (CBSMiami/NSF) - Auto insurance costs will come down slightly, more than a year after reforms aimed at reducing fraud in the state's "no-fault" auto insurance system were implemented, according to a preliminary analysis of rates by the state.

The Office of Insurance Regulation has announced that Personal Injury Protection coverage is projected to drop an average of 13.2 percent based upon on a review of 20 insurers that provide coverage for more than 75 percent of the Florida market.

The result of the decrease would be an overall 1.2 percent reduction in rates, because "no-fault" accounts for a small portion of auto coverage, the state insurance regulatory office stated in a release.

A spokesman for Chief Financial Officer Jeff Atwater, who was a proponent of the 2012 law, called the report a "positive trend" for consumers.

"PIP fraud remains a criminal activity that we are vigilantly fighting, but the positive progress being made suggests that the recent PIP reforms should be allowed to continue working to help improve Florida's auto insurance market," Atwater spokesman Chris Cate said in an email.

According to OIR, the drop is in line with the projections from legislation (HB 119) that targeted what officials said had become a $1 billion overall increase in rates due to fraud.

"The estimated average statewide savings reflect a positive trend in comparison to 2011, when 86 percent of auto filings were for proposed increases in 'no-fault' premiums -- the vast majority for double digit increases," the study declared.

The report is expected to further temper efforts to dump the requirement that Floridians purchase "no-fault" coverage and instead allow them to carry just bodily injury coverage, which a vast majority of motorists in Florida already purchase.

Senate Banking and Insurance Chairman David Simmons, R-Altamonte Springs, has been moving towards such legislation, but his effort was slowed after the 1st District Court of Appeal in Tallahassee rule on Oct. 23 that a challenge to the 2012 law needed to offer a "factual" motorist who is harmed by the law.

The challenge to the law presented an acupuncturist, a chiropractor, two massage therapists, along with a hypothetical "John Doe" representing health-care providers and a hypothetical "Jane Doe" representing motorists.

The case has been appealed to the Florida Supreme Court.

Donovan Brown, state government relations counsel for the Property Casualty Insurers Association of America, said the reduction in rates could have been even better, but some insurers may have been unsure how to proceed because of the lawsuit.

"That case causes mass confusion in the marketplace," Brown said.

Still, Brown expects the debate to continue over the future of "no-fault" as the full impact of the new law may not be known until later this year, when the results of the second round of premium filings take hold.

"When these reforms are fully implemented, then we'll have a better idea of what the true impact will be from the changes in 2012," Brown said.

Staff analysis of the 2012 legislation projected a 13.2 percent drop in rates after October 2012 rate filings based upon the new law.  An independent actuarial study required by the 2012 law projected that the bill would result in savings to PIP premiums between 14 percent and 24.6 percent.

Leading the charge in the rate reductions were Progressive Select Insurance and Progressive American Insurance, with reductions in "no-fault" coverage by 34.6 percent and 32.3 percent, respectively, with overall auto coverage down 15 percent and 11.7 percent.

Geico General Insurance Co., the state second largest auto insurance provider, had a 25 percent drop in "no-fault" coverage, while auto coverage grew 0.6 percent.

The state's largest auto insurance provider, State Farm Mutual Auto Insurance Co., had its "no-fault" coverage down 1.7 percent, while overall auto coverage decreased 3.3 percent.

Not every company submitted decreases in "no-fault."

A 58.1 percent increase in "no-fault" was filed by 21st Century Centennial Insurance, with overall auto premiums going up 26.9 percent, and Esurance Property & Casualty Insurance has "no-fault" increasing 20.9 percent with overall rates up 17 percent.

In the House, Rep. Carlos Trujillo, R-Miami, has filed two measures (HB 267 and HB 269) directed at repealing the "Florida Motor Vehicle No-Fault Law" and allowing Floridians to carry only bodily injury coverage.

Neither bill has been reviewed by a committee.

The News Service of Florida's Jim Turner contributed to this report.